Technology Licensing in Drugsand Bio-pharma

Kalyan K. BanerjiNational Law University, Jodhpur

Technology

• Systematic knowledge (conceptual, empirical, “Scientific”) embodied into tools, to perform human tasks.

• Mixture of physical artifact, social content and context, and procedures.

• Knowledge, BY ITSELF, is not technology

Product and Process Technology• Product Technology

• Many end-users (e.g., consumers)• Non-obvious relationship to creating/making other technologies• Often simpler

• Process Technology• Intermediate users• Instrumental to creating/making other technologies• More complex

• Technologies can be both product or process, and on alternate days, depending upon context (e.g., drill press is a product to drill press maker; part of a process to a tool-and-die shop)

Different paths to commercialization, depending on process/product distinctions.

What is technology transfer?

• Technology transfer is the process by which a developer of technology makes its technology available to a commercial partner that will exploit the technology.

• In the exploitation of pharmaceutical products, technology transfer by partnering in this way to bring a pharmaceutical product to market is a common feature of the industry.

Technology Transfer Cycle

Research - Knowledge Creation

Transfer Processes (varied)

Market Need

Competitive Analysis

Invent

Prove Concept

Prototyping

Detailed design

Product testing

Redesign

Production

Market

Distribute

Customer support

The Product Development Cycle

Patenting

Licensing

Disclosure

Commercialization

Products/Processes(Royalties)

The Technology Transfer Process

Agreement Administration

WHAT IS A LICENSE?

• License simply means permission – one person grants to another permission to do something

• A license is a permission to do something that, without the license, would be an infringement of IP.

• The person granting the license is usually called the licensor, and the person receiving the license is usually called the licensee

Patent Licensing -Indian Scenario

• A patent owner has the right to use, sale, transfer, license, mortgage and pledge the patent.

• The law on license of patent is well founded in India, though there are not many judicial pronouncements in this regard

• Indian Patent Act has specific provisions

Indian Scenario

• An owner of a patent can grant license. However, a co-owner of a patent cannot grant license without the consent of the other owner(s)

• A License or creation of any other interest in a patent is not valid unless the same is in writing

• The Agreement between the parties should be documented

• The agreement should be prepared on a stamp paper according to the Indian Law on Stamp duties

• The terms and conditions of the agreement should be explicit

• An application for registration of that document should be filed with the Controller of Patents within six months of the date of agreement

• The document registered will be effective from the date of its execution and not from the date of registration

• Both licensee and licensor will have to file application with Controller of Patents

• The terms of license shall be kept confidential by the Controller, if requested by the patentee or licensee

Types of Patent Licenses

• A patent grants its owner the right to exclude others from practicing the patented invention, and it does not give the patent owner the right to practice the patented invention. Licenses should be understood in this context

• Patent licenses can be classified as exclusive, sole and non-exclusive

Exclusive License

• Under an exclusive license, a patent owner transfers all indicia of ownership to the licensee only retaining the title to the patent

• The patent owner surrenders all rights under the patent to the licensee

• The licensor is not entitled to use the IP • The exclusivity can be limited by a field of use

Non-exclusive license

• By granting a non-exclusive license, the patent owner essentially promises not to sue the licensee for patent infringement

• The patent owner may use and license to more than one licensee.

• Sole License: - Only the patent owner and licensee can use the invention

Important Clauses

• Recitals• Definitions• Grant• Royalties• Terms and Conditions

RECITAL

• Parties : Licensor/licensee• Addresses: If a company, its Registration No.• Dates : Date of agreement, Date of

Commencement• Background of the transaction

DEFINITIONS• Interpretation clause• Consistency o used word

– Specific/certain/lucid

• Attribute – Specific meaning• Application to entire agreement• Example: Licensor shall mean UOR having a

business at Jaipur and shall include its subsidiaries, assignees and legal representative

• Licensee shall mean Kalyan resident of A-80 Snagar, Jodhpur and shall include his successors, assignees, administrators, executers and other legal representatives

• Licensed patent shall mean patents granted in USA, under patent No. 123, xyz and patent applications pending before Indian patent office having filling No. 456, def

Grant Clause

• Most Important: Defines scope of agreement• Status: Parties, type, subjects, rights, territory,

term• Example: Licensor grants a non-exclusive

license of the licensed patent within the territory of India from 1st day of January 2013 to 31st day of December 2014

ROYALTIES

• Types of Royalty– Lump sum– Fixed royalty– Running royality– Milestone royalty– Combination

• Mode and date of payment• Accounting and record keeping• Non-payment consequences

Terms and Conditions

• Term• Events

– Material breach – non-payment of royalty etc.– Bankruptcy– Insolvency– Act of God

• Rights after termination• Confidentiality

Pharma Licensing

• Special features for drugs and bio-pharma licensing

• The invention may be an NCE, a cell-line, new biotech process etc.

• For the sake of ease of discussion, let us call the drug or biotech material as Product and licensor is the patent owner

Field of Use Restrictions• Needs special consideration in pharma

licensing.• The Product may have preventive, diagnostic

and therapeutic uses for several diseases• In the absence of field of use restrictions, the

licensee would have rights to exploit the Product in all of those fields

• The licensee may not be interested in all the fields

• Therefore, it is in the interest of the licensor to give the licensee a field of use that permits the licensee to effectively exploit the Productin its desired field of use, but not to deprive the licensor of the opportunity to exploit the other potential uses.

• The field of use should be as clear and unambiguous as possible

Non-exclusive license

• In case of a non-exclusive license, the licensor reserves the right to grant more non-exclusive license

• Unless limited by territory and/or use, it may result full scale competition.

• Because of large investment required in pharma field, non-exclusive licenses are mostly confined to peripheral inventions

• New drug delivery systems(NDDS) or discovery methods are such inventions

• Non-exclusive license of an NDDS can be combined with a proprietary drug of the licensee

PAYMENT TERMS

• Some or all of the following are common in biotech or pharmaceutical license agreements– a license or signing fee– annual or other periodic fees– milestone payments– percentage royalties, which may include minimum

annual amounts– expenses of the patent prosecution program

Signing Fee/Annual Fees

• It depends on stage of development of the invention; inventor may try recoup some of the investment in the invention

• Annual or periodic fees are to incentivize the licensee to exploit the invention

• Mostly terminate when the percentage royalties kick in

MILESTONE PAYMENT

• Very common in pharmaceutical industry• Triggered by the typical development

benchmarks for a pharmaceutical product, the achievement of which validate the value of the Product

• The typical milestones are:– Filing of INDA or equivalent– Completion of Phase I clinical trials

– Completion of Phase II clinical trials– Completion of Phase III clinical trials– Filing of NDA or equivalent– Approval of NDA or equivalent

• Milestone payments on Clinical trials should be clear about whether on “completion” or successful “completion”

• It could be at the start of the next phase

DRUG MASTER FILE

• Drug master file is the collection of information and data that results from the development process for a potential pharmaceutical product, such as toxicology studies and clinical trial results

• The drug development process is highly regulated and structured in the sense that certain types of tests and procedures must be conducted for all potential products

Drug Master File

• The cost of drug development is prohibitive (current estimates are for $800 million to $ 1 b), and therefore the drug master file has an inherent value represented by that cost

• An important issue is the disposition of the drug master file in the event of early termination of the license agreement